From Planning Commission to Omission

The Advisory Board of the Planning Commission meets in New Delhi on July 24, 1951. Prime Minister Nehru (in glasses) is seated in the centre. Photo: www.photodivision.gov.in

The Narendra Modi government has given four reasons why India’s 64-year old Planning Commission, which formulates the five-year economic plans among other things, should be scrapped and replaced by a new institution that reflects the current times.

The four “weaknesses” of the Planning Commission highlighted by the government in a new document are:

No structured mechanism for regular engagement with the states.

Ineffective forum for resolution of Centre-State and interministerial issues.

Above all, the Modi government is pitching for a new planning institution to replace the existing one because of the “Transformation in the role of the State and the state of the economy from a command and control eco-system to a market economy in an increasingly integrated globalised world.”

The new institution is expected to reflect the economic, political and social exigencies of a modern India as evident from the growth and transformation in key areas since 1951, namely burgeoning population, including urban and youth population; rise in GDP from Rs. 2.8 lakh crore then to `52.5 lakh crore now; and a radical shift from a largely agrarian economy to a booming services economy.

Announcing the scrapping of the Planning Commission in his first Independence Day speech in August this year, Prime Minister Modi said that it should be replaced by an organisation which can “think creatively, strengthen the federal structure, and energise states.”

Prime Minister Narendra Modi announced the dissolution of the Planning Commission in his first I-Day speech on August 15, 2014. Photo: www.pib.nic.in

He referred to remarks made by former Prime Minister Dr. Manmohan Singh on April 30, 2014, that the Planning Commission had “no futuristic vision in the post-reform period.” The commission would have to reinvent itself to remain more effective and relevant in the present situation, Modi added.

On August 13, 2014, the Union Cabinet chaired by Prime Minister Modi had approved the repeal of the Cabinet Resolution of March 15, 1950, which gave birth to the Planning Commission, and authorised Modi to finalise the new institution to replace the old one.

Predictably, the decision to disband the Planning Commission, which was set up in March 1950, has not gone down well with the Congress-ruled states which are insisting on a restructuring of the plan panel as opposed to setting up of a new institution. Although many states where the Congress is in power admit that the Planning Commission has lost its relevance in 21st century India, especially in view of the country’s rising stature on the world stage, they’re loath to dump an institution that was set up under the regime of free India’s first prime minister, Jawaharlal Nehru, Congress leader and freedom fighter. Hence, scrapping the Planning Commission is considered akin to dumping the Nehruvian model of economic development.

On the other hand, the current political dispensation in New Delhi, led by the Bharatiya Janata Party under the National Democratic Alliance, is set to reverse and replace several central or federal structures and institutions that it feels are out of sync with current times, irrespective of their political implications.

Prime Minister Modi set the tone when he recently addressed a consultative meeting of chief ministers on the subject of replacing the Planning Commission. “Can we develop a new mechanism that plans according to India’s strengths, empowers states, and brings on board all economic activity, including that which happens outside the government?” he asked the chief ministers of all the states ruled by the Congress, the BJP and several regional parties.

Observing that think-tanks in countries like USA functioned independently of the government and still played a major role in policy-making, Modi said that in India, too, there was a great deal of economic activity that happened outside the government setup and there was a need to design policies for them as well, and that the states should have a key role in the new institution that would replace the Planning Commission.

The Modi government will eventually have its way and the replacement of the Planning Commission is a matter of time. Until then, the prime minister will have to use all his persuasive skills to bring on board the non-BJP states and implement what he describes as “the spirit of cooperative federalism.”

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